South African-based Standard Bank today said it would halve capital allocated to its non-African business as global regulatory changes make some business lines uneconomical. The move will reignite the conversation about whether uncertainty over the regulatory climate will hurt major financial centres such as London, where most of the bank's non-core business is based.

The bank said today that it would cut expenditure and intended to halve the amount of capital utilised in operations outside of Africa from $3bn to approximately $1.5bn. The majority of non-African business, which posted earnings of $44m in the first half of this year, is run from London.

The bank added that it would retain a presence as a legal entity with a banking licence in London. It made the statements while reporting its results today.

Jacko Maree, the bank’s chief executive, told Financial News: “Of course the regulatory environment around world has got tougher... Capital requirements have changed and it’s made some parts of our business that were previously viable economical less so.”

Regulators worldwide, including the Basel Committee on Banking Supervision, are in the process of drawing up new capital requirements for banks intended to make them more financial secure in times of stress. Standard Bank said it currently holds 12.4% of Tier 1 capital.

Maree told Financial News that plans to pare back its operations in London were not down to additional regulatory requirements being considered by UK rulemakers.

The Independent Commission on Banking, led by Sir John Vickers, is considering whether to force banks operating in the UK to hold higher ratios of Tier 1 capital than Basel III would demand.

“This is not about London as a regulatory jurisdiction. We’re too small to really be directly affected as some of the global banks might be,” Maree said.

He added: “I’m not sure if it would be any different if our London operations were in Singapore or elsewhere.”

It is not yet clear whether the cuts in capital allocated to the non-African operations will result in the loss of jobs in London, as the bank is yet to decide how to target cost savings.

Late last year, Standard Bank said it would cut 160 jobs in London. It said no material impact to current headcount is currently planned, although said it would switch some roles and functions to its South African operation. The bank currently employs 900 permanent staff in London.

The South African bank has a long-stated ambition to cut costs, after it embarked on a range of long-term and short-term cost saving initiatives across the group last year.

Its cost-cutting drive of its international assets aims to reduce costs by $75m on an annualised basis.

Maree said: “We remain convinced that the London presence as a legal entity with a banking licence is critical for the growth of our corporate and investment banking franchise. However, the capital base is too big and the costs are too high.”

He added: “We aim, therefore, to make better use of the prudential limit for foreign currency lending on Standard Bank South Africa's balance sheet for transactions in our core sectors which will reduce the capital demand in London, but increase the capital requirements in South Africa."

The bank, Africa's largest lender by assets, reported a rise in first-half net profit, up 11.7% to $906.1m.